Microinsurance within the Financial Inclusion and Sustainability Framework

Microinsurance in Egypt has seen substantial growth in the past five years and plays a key role in achieving the Sustainable Development Goals (SDGs). At the 1st Microinsurance Conference of the Insurance Federation of Egypt (IFE), experts discussed how to accelerate market development in light of the upcoming regulatory changes for microinsurance.

With over 100 million inhabitants, Egypt has the third-largest population in Africa. Of the country’s working population, about 27% are considered to be informally employed and 40% are self-employed. In his opening speech, IFE Chairman, Alaa El-Zoheiry, therefore underlined the fact that MSMEs are the backbone for a strong economy in the country. MSMEs received loans totalling EGP 27.1bn by the end of 2021 compared to EGP 19.4bn at the end of 2020, with a growth rate of over 40%. The number of microfinance beneficiaries has reached 3.5 million, compared to 3.2 million at the end of 2020, with a growth rate of 9.4%.

Credit life insurance became mandatory for microloans in 2018, which helped to boost the microinsurance market in the country. The microfinance sector has also contributed to women’s empowerment, as women represent 62% of the total number of beneficiaries. According to the IFE, these indicators highlight the fact that the availability of insurance protection gives the opportunity for more innovation and productivity for MSME owners.

A number of challenges still stand in the way of promoting microinsurance in Egypt. The most significant seems to be the lack of efficient distribution channels to reach the target customers as well as the lack of (statistical) data, resulting in difficulties in determining pricing. The rapid development of digital solutions creates a lot of new opportunities to develop new products and reduce costs. Partnerships between tech companies and distribution channels as well as insurance providers are promising approaches to increase outreach and reduce costs. (see interview).

In 2019, the IFE developed its sustainable development strategy, with the aim of providing access to insurance services for those who do not have access to them. To this end, the IFE has developed a number of instruments and initiatives that make insurance an important part of Egypt's strategy for financial inclusion with the aim of protecting and promoting sustainable economic development in Egypt in accordance with the UN SDGs. Speakers from the Egyptian insurance industry as well as the Financial Regulatory Authority (FRA) made clear that access to financial services including insurance is seen as a key component in achieving the SDGs in Egypt by 2030. In the aftermath of the pandemic, the Chairman of the FRA, Mohammed Omran, called upon the insurance industry to have answers ready to cope with the upcoming crisis in the future. 

The insurance industry in Egypt is now preparing a comprehensive insurance bill. The new regulation is currently being discussed and is due to become law shortly. The proposed legislation sets rules for microinsurance distribution and will allow the creation of special microinsurance companies allowed to sell both life and non-life insurance. In addition, the FRA aims at improving reporting in order to increase financial stability as well as collect all the accurate statistical data relating to microinsurance, covering various dimensions including the number of policies, the number of clients, premiums and compensation paid. And finally the FRA will increase its efforts to raise awareness for insurance. By 2026 the results of those efforts will be reviewed.

The 1st Microinsurance Conference was certainly not the last event the IFE will host to facilitate the development of microinsurance by providing a platform to exchange knowledge and experience not only within the country but also among countries in the region.

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Fawry, one of the largest Fintechs in Egypt, provides digital payment services and has an insurance arm, Fawry insurance brokerage. We spoke with Menna Alla Hegazy, Founder and General Manager.

 

 

I started my career with the boom of retail banking in Egypt. It was very exciting to convince average Egyptian individuals to open a bank account. I moved on the bank ladder from a sales agent to head of branch. During my banking journey, I noticed lots of small deposit holders, especially ladies, asking about insurance products. The bank I worked in then had insurance company subsidiaries. I noticed we were generating lots of insurance revenue from these subsidiaries, so I decided to study insurance and I got my certificate. From then I started my journey with microinsurance, realising that Fawry branches and over 250,000 payment points is an excellent start to make microinsurance easily available to millions of Egyptians who do not have insurance.

Fawry is the most trusted and biggest name in digital payment in Egypt, serving annually around 20 million customers who trust Fawry with their payments. Fawry decided to build on its electronic payment network covering all Egypt to provide affordable microinsurance electronically. We got the licence for full insurance brokerage in 2019. Since then we are Egypt’s largest electronic distributor of microinsurance.

I was assured how the Egyptian government is serious about financial inclusion. It was very interesting to see the Egyptian Post with its vast network planning to promote microinsurance, and I am very excited about the expected new insurance law that will allow more opportunities for microinsurance penetration.

 

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The 1st Microinsurance Conference was hosted by the Insurance Federation of Egypt. Key topics discussed at the conference were the role of the legislative and regulatory framework in supporting microinsurance; the Egypt Vision 2030 of sustainable economic development, challenges and opportunities of financial inclusion; international practices and local applications of products, business models and distribution channels; and the critical role of female inclusive insurance in securing the financial future of women. Around 300 participants attended the event representing 19 countries and 49 insurance companies.